Rescue efforts continue in Chile, mining industry impacted

Chile's mining sector affected

SAN FRANCISCO (MarketWatch) -- Rescuers searched Sunday for victims in the rubble of collapsed buildings in Chile a day after the massive 8.8-magnitute earthquake shook the south of the country, killing about 300 people.

Media reports said that up to one fifth of Chile's copper-mining capacity was halted after the quake. Chile is the world's largest copper producer and exports a third of the global supply, mining more than 5.9 million tons in the past year

The biggest mines are in northern Chile and were spared damage, but some analysts said the supply disruptions in smaller deposits near Santiago could lead to prices rising on Monday, according to media reports.

In Concepcion, the largest city near the quake's epicenter, police used tear gas to halt looting of a supermarket. Banks were robbed in other nearby cities, according to media reports.

International aid on the ground began to pour in Sunday. The Wall Street Journal reported that Red Cross workers had started taping off sidewalks surrounding buildings and warning residents that structures could still collapse. American aid agencies such as the North Carolina-based Samaritan's Purse have emergency workers and supplies on ground in southern Chile.

"Our disaster response team based in neighboring Bolivia is bringing truckloads of foods and blankets," that group wrote in an email.

The Chilean quake, which hit offshore in the Pacific Ocean and was one of the biggest in recorded history, was some 500 times stronger than the magnitude 7.0 quake that shook Haiti on Jan. 12, killing some 200,000 people.

Some 1.5 million Chileans were affected by the quake that severely damaged more than 500,000 homes.

At least 10 strong aftershocks were felt in the hours after the quake, including some 2,000 miles away in Brazil, the U.S. Geological Survey said.

The tsunami fears for Asia never materialized, and areas such as Japan and Hawaii, where severe tsunami warnings were in effect, were spared from dangerous ocean surges. The U.S. Pacific Tsunami Warning Center had issued a tsunami warning for all Pacific nations following the quake Saturday -- the first Pacific-wide tsunami advisory since 1964 -- and said that sea-level readings could threaten distant coasts. The warning was lifted on Hawaii, after about 100,000 people were evacuated from coastal areas across the state on Saturday. In Japan, officials downgraded the tsunami warning and waves gently swiped the coasts. The biggest wave that hit Japan was 1.2 meters on the northern island of Hokkaido, the Associate Press reported.

Codelco, Chile's state miner, closed two of its major mines following the quake, including El Teniente, the world's largest underground copper mine. The company said it would resume operations Monday. Other smaller mines around Chile that lost electricity will be closed longer.

Citi analyst David Thurtell told Reuters Sunday that while the quake didn't physically damage the mines, "the major impact may come from the disruption on deliveries from the mines and from the disruption of power."

Some mining companies with shares traded in North America also said the quake did not have major impact on their Chilean mining operations, including Barrick Gold Corp.
ABX, +0.14%
Kinross Gold Corp. (K) and Teck Resources (TCK.B).

Risk assessor Eqecat, the Oakland, Calif.-based catastrophe modeling company estimated that economic damage in Chile could range between $15 billion and $30 billion, about 10% to 15% of the country's GDP.

Nick Chamie, head of emerging markets for RBC Capital Markets told Reuters that the Chilean peso will weaken sharply as economic activity slows in the country and said the central bank would probably delay raising interest rates.

"It's likely the central bank will keep liquidity and monetary conditions extremely loose in the near future in order to support the government's efforts to stabilize the economy and financial system," Chamie said.

Alberto Ramos, senior economist at Goldman Sachs in New York told Reuters that Chile has one of the best-managed economies in the hemisphere and will be able to weather the destruction. He said that the peso will only be affected moderately, because Chile can tap into its funds saved outside the country. Both analysts agreed that the reconstruction effort would provide a boost to economic activity through Chile.

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